Brazil Retaliates Against Cotton Subsidies

March 9, 2010

The government of Brazil has announced it will impose trade sanctions against billions of dollars
of U.S. exports in retaliation against what it says are anti-competitive subsidies for U.S. cotton.
In a case that has been pending before the World Trade Organization (WTO) for some time, the world
trade governing body has authorized $829 billion in annual penalties against U.S. products. Brazil
says it will impose sanctions on products ranging from ketchup to automobiles, and that they will
remain in effect until the subsidies are dropped.

Brazil contends the United States has been able to maintain its position as the world’s
second-largest cotton producer because of $3 billion in subsidies paid annually to U.S. farmers.
China is the largest cotton exporter, and Brazil is fifth.

The office of the U.S. Trade Representative (USTR) issued a statement saying: “We are
disappointed to learn that Brazil’s authorities have decided to proceed with countermeasures
against U.S. trade in the WTO cotton dispute. USTR is working to reach a solution to the issues in
this dispute without Brazil resorting to countermeasures and we continue to prefer a negotiated
solution.”

The National Cotton Council of America (NCC) said the actions by Brazil are unwarranted given
world cotton market conditions and changes that have been made to the U.S. cotton program.

The council said Brazil is taking retaliatory steps even though world cotton prices area more
than 50-percent higher than they were when the WTO case was decided. NCC added that the U.S. share
of the retaliation awarded by the WTO is “relatively small and fixed at $147 million.

Noting that the sanctions announced by Brazil do not take effect for 30 days, the council
urged the two governments to engage in discussions to avoid the “harmful effects of
retaliation.”